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Africa to earn US$7 billion from legalising cannabis by 2023

Bereng Mpaki

MOST African countries could fail to cash in on the US$7, 1 billion worth cannabis industry due to some government’s reluctance to expedite the legalisation of medical marijuana, a continental report on cannabis has found.

It is currently estimated that more than 38 000 tonnes of illegal cannabis is produced across Africa each year.

However, the African Cannabis Report says Africa’s legal cannabis industry’s worth could be more than US$7, 1 billion by 2023.

The report is compiled by a European-based market intelligence and strategic consultancy firm, Prohibition Partners.

Prohibition Partners is a source for data and information into established and burgeoning cannabis markets. Founded in 2017, Prohibition Partners has a mission to open up the international cannabis industry through reliable data and intelligence.

The report, which was released on 21 March 2019, includes detailed market value forecasts, regulatory timeline analysis, consumption data and healthcare analyses for nine key markets within the continent.

In May 2017, Lesotho became the first African nation to grant a licence to grow medical cannabis legally although it had legalised medical marijuana in 2008 through the enactment of the Drugs of Abuse Act.

Since then, Zimbabwe followed Lesotho’s lead by legalising production of cannabis for medical and research purposes in 2018.

South Africa also followed suit last September by legalising the growing of cannabis for private purposes and the use of cannabis for adults in private places.

In Lesotho, the licence permits the production, supply, export, and transportation of medical cannabis and cannabis products from Lesotho.

However, currently only large businesses can afford the hefty M5 million (about US$ 360 000) licence fee. Small-scale farmers continue to cultivate recreation cannabis illegally.

And the report says despite three African states having legalised medical cannabis production, Africa remains a central hub for the illegal trading of cannabis.

“Africa remains a central hub for cannabis trafficking with Ghana, Nigeria, eSwatini being the most notable points of distribution,” the report reads.

“South Africa is a key market for cannabis.

“The cannabis produced in Africa is often not intended for a domestic market (according to the Narcotics Control Board, half of all cannabis produced in Ghana has been destined for export since the late 1980s). In Lesotho, all cannabis supplies will remain slated for export until new local laws legalise medicinal or recreational use of the drug.

“However, Lesotho is the first country in the region to begin legal cultivation and the country has an advantageous climate for growing cannabis. The high-altitude mountainous region has an abundant water source (especially for those who can drill) as well as rich, fertile soil making it an ideal region for cultivation. As an extremely poor region poised for growth within the cannabis market, Lesotho is already seeing an influx of foreign investment.

“From a financial standpoint, the 50+ states and territories which comprise Africa could reap significant rewards through the legalisation of cannabis with international demand offering a strong opportunity to unlock the potential value of Africa’s legally produced cannabis. But this will only be possible if cannabis from Africa can meet international standards.”

The report indicates however, that despite land and labour being low-cost in Africa, setting up commercial cannabis operations could be expensive given the paucity of irrigation infrastructure.

“The agricultural expertise in cannabis farming could position Africa as a leading producer of cannabis but the reality is that unless innovative irrigation technologies are introduced, there is likely to be insufficient water to support mass scale operations in the region, particularly in newer cultivation methods such as hydroponics. As a result, Africa might be able to help supply demand but is unlikely to be able to produce the quality cannabis that the maturing market will inevitably call for.

“Because of the poor economic conditions faced by many African countries, any legalisation of cannabis in the region will have a duty to safeguard local interests. In this respect Zimbabwe could become a regional blueprint as licence applications can only come from those who can prove citizenship or residency however, the Health Minister retains the rights to permit exemptions.

“With more than 33 percent of Africans living below the poverty line, the recreational market is unlikely to achieve the per capita value sales potential of more affluent regions like Europe and North America. Nonetheless, this is a region in which volume consumption rates are likely to be higher per capita.

“The challenging economic circumstances of many African nations, coupled with a long history of cannabis use and a favourable climate means that many farmers rely on cannabis as the only way to secure an income and meet basic needs such as education and food,” the report said.

The report has also raised concerns about the state of the continent’s healthcare system in relation to its capacity to embrace the medicinal benefits of cannabis.

“Companies and entrepreneurs seeking to invest in the cannabis industry in Africa also face other structural hurdles. The region has extremely rate of high HIV and AIDS (more than one fifth of all adults are estimated to suffer from the immune deficiency condition).

“Tuberculosis (TB) is another prevalent disease in the region which cannabis reportedly has benefits for.

“In addition, the Institute of Advanced Studies has reported a rise in the number of chronic health conditions in the region. Yet, despite a solid prospective patient base, which is likely to be higher than in other geographical areas (notwithstanding the use of cannabis for mental health conditions), the inadequate accessibility to healthcare for many Africans means that the formal channels to market for medicinal cannabis would be largely reliant on NGOs and health charities. Many of these groups could be slow to add cannabis to their inventories.

“Africa is also heavily reliant on imported pharmaceutical goods and donations – UNICEF reports that Malawi’s health sector is one of the world’s most heavily donor-supported, accounting for 80 percent of development expenditure. Some of the health supplies charities may be against the legalisation and distribution of cannabis, particularly if they have strong religious affiliations. That said, both real life and anecdotal stories of the potential benefits of cannabis on health could boost demand.

Assuming there is wholesale legalisation and regulation of the cannabis industry, Prohibition Partners calculates that South Africa and Nigeria potentially represent the region’s two largest value markets going forward to 2023 and beyond.

“This demonstrates the clear potential for an economic boom for African countries that actively seek to legalise and regulate their cannabis market.

“The market sizing contained within this report assumes that, by 2023, all the countries profiled in this report will have legalised medical cannabis and regulated its recreational use. It is our view that Moore’s law is currently at play within the global cannabis industry; consumer and business momentum is building pace and is hitting a critical mass.

“At Prohibition Partners, we anticipate that medical cannabis consumption (as a percentage of the population) will increase faster than seen in other early adopter nations and states,” the report further reads.

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